MANAGING FINANCIAL RESOURCES

Managing Financial Resources and Decisions - Oak Farm Leisure Events

Managing Financial Resources and Decisions - Oak Farm Leisure Events

Task 1 - Sources of Finance Available to Oak Farm Leisure Events

Regardless of the fact that whether we are looking for sources of finance for Oak Farm leisure, or any other venture, the first and foremost thing is to identify the actual need of finance, and then select an appropriate source for it. Oak Farm Leisure Events needs finance for start up, this means that we would filter our options accordingly. There are two ways of short listing financing options, the first one is to categorize them with the source; internal or external sources. The second criterion is to short list them according to their tenure.

Considering the case of Oak Farm Leisure Events, according to its budget, it has a total start up cost of £4,020,000 which includes cost of land, construction, fencing, signposting and vehicles. Now considering the internal sources of finance, we have £600,000. Apart from this personal investment from the owners, we have a shortfall of £3,420,000 which needs to be financed externally. This makes it clear that now will be looking for external sources of finance only.

If we short list our option according to the tenor, then there are certain factors that we have to consider. First of all, the start up cost short fall is £3,420,000 which needs to be financed urgently, as the owners want to make it ready till September, and open it for use in October. Considering this scenario, we should go for long-term financing, as this would raise more finance to meet the urgent need of the financing short fall being faced by the Oak Farm Leisure Events.

After filtering the criteria for selecting the sources of finance, we now have two features which we will look for in the source of finance, firstly it should be from an external source, and secondly it should long term source of finance offering large sum. Considering these filters, the options we have are bank loans and bonds. However in order to meet operational cash flow needs, the options of bank overdraft and loan from suppliers can also be used

Bonds

Another source of medium/long term finance, which can be used by Oak Farm Leisure Events, is bond. It can help the business to acquire the fund to meet its start up expenses. It is not necessary that the Oak Farm Leisure Events should only go for bonds; instead their short fall can be entertained by a set of different options making up the total sum of shortfall. Bond also has two options, it can either be acquired by any corporation, which would be a corporate bond, or it can be acquired from a government bank, this would be a government bond. The advantage with government bond id that the risk of its default is very low. Bond also has an added advantage of bonuses where it would be easier for Oak Farm Leisure Events to sell ...